Don't Wait! Why Taking Your 2025 RMD Early Could Be a Smart Money Move Now
Are you a retiree wondering about the best time to take your Required Minimum Distribution (RMD)? Traditionally, many people wait until the end of the year to maximize tax-deferred growth in their retirement accounts. However, with the Federal Reserve expected to make more interest rate cuts soon, waiting until December 31st might cost you money on your savings.
This article explains why taking your 2025 RMD early could be a smart strategy to lock in today's higher interest rates.
Key Takeaways for Your Retirement Planning
Secure Higher Yields: By withdrawing your RMD cash now, you can move it into a high-rate account, like a Certificate of Deposit (CD), before the Fed's expected rate cuts lower those yields.
Rate Cuts Are Looming: The central bank is widely anticipated to cut its benchmark rate again, potentially as soon as October 29th, with another possible reduction in December.
CDs are King Right Now: A CD is a great way to secure a guaranteed return because the rate is locked in for the entire term, regardless of future Fed moves.
Why Waiting on Your RMD Could Be Risky for Your Cash
If you're subject to RMDs (which must be taken by December 31st to avoid steep IRS penalties), you have all year to decide when to withdraw.
For years, the advice was simple: wait until the last minute. This kept your money growing tax-deferred for as long as possible.
But the current financial landscape is different. We are currently in a period of high yields for safe cash products. Once the Federal Reserve cuts rates, banks and credit unions typically follow by reducing the rates they offer on new CDs and savings accounts. If you wait until the end of the year to take your 2025 RMD, the high-rate offers available today will likely be gone.
Lock In Returns with Certificates of Deposit (CDs)
A Certificate of Deposit (CD) offers a secure, guaranteed return. When you open a CD, you lock in a specific interest rate for the entire term—whether it's 6 months, 1 year, or longer.
If you take your RMD cash now, you can immediately shop for the best CD rates and secure a strong return that won't change even after the Fed cuts rates. This is a valuable strategy for the portion of your RMD you won't need immediate access to. Just be mindful of early withdrawal penalties if you need the money before the CD term ends.
Need Accessible Cash? Look at High-Yield Savings
If you want to keep your RMD money accessible—meaning you might need to withdraw it without penalty—consider these options:
High-Yield Savings Accounts (HYSA): These accounts offer competitive returns (some are currently reaching 5.00% APY) while allowing you to withdraw funds whenever you need them.
Money Market Accounts (MMA): These often have slightly lower rates than top HYSAs (the current top is around 4.40% APY) but include the benefit of allowing you to write paper checks.
Important Note: The rates for both HYSAs and MMAs are variable. This means that when the Federal Reserve cuts rates, the yield on these accounts will eventually decrease. This is another reason to act sooner rather than later to maximize the high-rate earnings period.
Renner Financial Group’s Final Thought
For many retirees, taking your 2025 RMD sooner rather than later is a strategic move to benefit from the high interest rates available right now. If you don't urgently need the funds, moving the cash into a high-yield CD or savings account allows you to secure a better return before the market shifts.
Need help calculating your RMD or creating a strategy for your retirement savings?
Contact Renner Financial Group today to discuss your retirement and investment goals.
